Hidden Power of Trading Activity: The FLB in Tennis Betting Exchanges

Abstract

This paper examines the impact of trading activity on the Favourite-Longshot Bias (FLB) in tennis Betting Exchanges, using direct measures such as betting volume, average bet and standard deviation of the odds. According to predictions based on Disagreement Models, odds mispricing is positively associated with trading volume but negatively associated with the presence of institutional bettors. The FLB is also positively related to the degree of uncertainty in the market. The existence of two simultaneous markets (a "main" and an "alternative" market) in this specific sportsbetting environment has enabled us to observe that the relative amount of attention given to the favourite versus that given to the long shot is positively associated with the FLB. Finally, information is more rapidly incorporated into the odds in the market that receives more attention from bettors, an effect that is intensified by the arbitrage and hedging that occurs between the two markets.

Sports prediction and betting models in the machine learning age: The case of tennis

“…All figures are averaged over the calibration periods. Another route of investigation would be the use of betting exchanges, where individuals can back and lay bids without the need for bookmakers (see, for example, Abinzano et al (2019) in the context of tennis). Franck et al (2010) conduct a comparison of bookmakers and a major betting exchange in terms of prediction accuracy on the example of soccer.…”

When to Walk Away and When to Risk It All

“…After a stretch of positive results, participants may overestimate their future odds of success (Abinzano et al, 2017; Arkes, 2013; Paul et al, 2014) or may instead believe their luck is destined to run out (Croson & Sundali, 2005; Miller & Sanjurjo, 2018). The behavioral underpinnings of our model share many commonalities with the various hot hand models such as Abinzano et al’s (2017) finding that bettors of professional tennis matches tended to overestimate the future odds of success and Paul et al’s (2014) result that individuals betting on NFL games also exhibited a hot hand phenomenon. Applying the hot hand effect to our experiment, we might expect people to overestimate the likelihood of success after a number of successful rounds.…”

“…Instead, the issue is whether outside observers of a streak of successes believe that a hot hand effect underlies the streak, making them more likely to believe that the prospects of continued success are greater. The nature of the hot hand influence in this analysis resembles beliefs by bettors in major tennis tournaments that overestimate the future odds of success for past winners (Abinzano et al, 2017) and by people who bet on winning streaks against the spread for NFL games (Paul et al, 2014).…”